In re Methyl Tertiary Butyl Ether ("Mtbe") Products

• Decision Date: 06 July 2009
• Docket Number: No. 00 MDL 1898 (SAS).,No. 04 Civ. 3417 (SAS),,04 Civ. 3417 (SAS),,00 MDL 1898 (SAS).
• Citation: 643 F.Supp.2d 446
• Parties: In re METHYL TERTIARY BUTYL ETHER ("MTBE") PRODUCTS LIABILITY LITIGATION. This Document Relates to: City of New York, et al., Plaintiffs, v. Exxon Mobil Corporation, Defendant.
• Court: U.S. District Court — Southern District of New York

643 F.Supp.2d 446

In re METHYL TERTIARY BUTYL ETHER ("MTBE") PRODUCTS LIABILITY LITIGATION.

This Document Relates to: City of New York, et al., Plaintiffs, v. Exxon Mobil Corporation, Defendant.

No. 04 Civ. 3417 (SAS),

No. 00 MDL 1898 (SAS).

United States District Court, S.D. New York.

July 6, 2009.

COPYRIGHT MATERIAL OMITTED

Robin Greenwald, Esq., Robert Gordon, Esq., Weitz & Luxenberg, P.C., New York, NY, for Plaintiffs.

Victor M. Sher, Esq., Todd E. Robins, Esq., Joshua G. Stein, Esq., Nicholas G. Campins, Esq., Marnie E. Riddle, Esq., Sher Leff LLP, San Francisco, CA, Susan Amron, Daniel Greene, Assistant Corporation Counsel, New York, NY, for Plaintiff City of New York.

Peter John Sacripanti, Esq., James A. Pardo, Esq., McDermott Will & Emery LLP, New York, NY, for Defendants and Counsel for Exxon Mobil Corporation.

OPINION AND ORDER

SHIRA A. SCHEINDLIN, District Judge:

I. INTRODUCTION

In 2003, the City of New York (the "City") filed a Complaint against various corporations for their use and handling of the gasoline additive methyl tertiary butyl ether ("MTBE"), alleging that the MTBE contaminated — or threatened to contaminate — the City's groundwater supply.¹ Defendant Exxon Mobil Corporation ("Exxon") — the only remaining non-settling defendant — moves in limine to preclude the City from introducing evidence of past or future investigation and treatment costs until the City proves actual injury to its wells.² For the reasons that follow, Exxon's motion is granted in part and denied in part.

II. BACKGROUND

A. Facts

The New York City water supply system provides drinking water to over eight million customers in the City of New York and one million customers in upstate communities.³ The water supply system largely relies on the collection and storage of surface water in upland reservoirs in upstate New York and Delaware.⁴ The water supply system also includes a groundwater system, which is not presently in use.⁵

The New York City groundwater system consists of sixty-eight wells located in Queens, New York, which draw water from the Brooklyn-Queens Aquifer.⁶ The system was previously owned by the Jamaica Water Supply Company ("JWSC"). A statute enacted by the New York Legislature in August 1986 required "the City of New York to acquire . . . and to maintain and operate" all or part of the assets of the JWSC.⁷ In May 1996, the City purchased sixty-nine wells in Queens from JWSC, at an approximate cost of $ 148 million.⁸ On July 24, 1996, The New York State Department of Environmental Conservation ("DEC") issued a water permit that authorized the City to operate the New York City groundwater system.⁹

At a public information session on November 21, 2001, the Commissioner of the New York City Department of Environmental Protection noted that the JWSC had produced some of the poorest quality water in the area.¹⁰ Some JWSC customers lacked confidence in the quality of the water. After 1996, production from the JWSC wells continued to decrease. By 2005, only five former JWSC wells were producing water continuously for delivery to customers.¹¹ As of May 2007, no consumers are receiving drinking water from the City's groundwater system.¹² The City has not pumped water from any of the wells at issue in this trial — the area known as "Station 6" — to its distribution center since the City acquired them in 1996.¹³

In 1994, the City — partnered with the United States Geological Survey ("USGS") — commenced the Brooklyn-Queens Aquifer Study, a multi-year planning study of the New York City groundwater system.¹⁴ In 1999, the findings of the study were published in a report entitled "The Feasibility Study for Use of the Brooklyn-Queens Aquifer as an Additional Potable Water Supply Source" ("BQA Report").¹⁵ The BQA Report recommended using the Brooklyn-Queens Aquifer groundwater for potable water supply and treating the groundwater at several regional facilities, or well clusters.¹⁶ The BQA Report specifically recommended siting the first well treatment cluster at Station 6 and using that cluster to demonstrate that high quality drinking water on par with the quality of the City's upstate water could be produced from the New York City groundwater system.¹⁷ If Station 6 is completed, the City expects that it will provide up to ten million gallons per day ("mgd") of potable water to the public.

Currently, approximately half of the City's water supply is distributed through the Rondout-West Branch Tunnel, which links to a remote surface water reservoir.¹⁸ The tunnel has been leaking for at least ten years, and necessary repairs require taking the tunnel out of service. In order to take the tunnel out of service, the City must find an alternative source of 400 mgd of potable water.¹⁹ In addition, the lack of pumping from the Brooklyn-Queens Aquifer contributes to flooding in Queens.²⁰ Finally, an additional water management plan suggests that the normal output from the New York City groundwater system should be increased to supplement the upstate drinking water supply in case of droughts, which have occurred at emergency levels four times since 1982.²¹

Exxon contends that the City has no firm plans to build a treatment cluster at Station 6 and that City planners currently favor building a third tunnel to surface water reservoirs to satisfy any projected water shortages. City deposition witnesses testified that the City has completed early stages of the design process for the Station 6 treatment cluster²² and has earmarked funds for final design and engineering work.²³ The City alleges that it has already spent just under one million dollars in designing the Station 6 treatment cluster and seeks damages for that expenditure.

None of the Station 6 wells were turned off in response to MTBE contamination and Exxon contends that these wells are unusable for reasons unrelated to MTBE contamination.²⁴ The City contends that the value of pumping water from these wells far exceeds the cost of treating the other contaminants and that other contaminants are more easily removed—at a much lower cost—than MTBE.²⁵ The City further asserts that if the Station 6 wells are turned back on, there will be an immediate influx of MTBE.

B. Trial Structure

This Court adopted a bellwether approach to this trial: Among the dozens of wells that the City alleges have been injured by Exxon's MTBE, Exxon and City each chose five to litigate. The parties recently agreed to litigate only the City's five focus wells during the initial bellwether trial. The City's focus wells are 6, 6A, 6B, 6C, and 6D, which are all in Station 6. MTBE has been detected in each of these wells. All of these wells are available for use by the City, but none are currently in use.

This case will be tried in four phases, with special jury interrogatories posed at the end of each phase.²⁶ Phase I will focus on the City's groundwater supply plans, asking the jury whether the City intends to begin construction of Station 6 in the next fifteen years and to use water from the wells in the next fifteen to twenty-five years. Phase II will ask the jury whether MTBE will be present in the wells when the Station 6 treatment facility is completed or immediately after the wells are turned on.²⁷ Phase III will focus on the remaining liability issues, such as causation and damages.²⁸ Phase IV will focus on punitive damages.²⁹

C. Motion in Limine

Exxon moves to prevent the City from presenting evidence of past or future costs relating to MTBE treatment and design until it proves actual injury. Exxon argues that this case concerns threatened wells because the City's property interest is—at most—in the use of the water and the City—for reasons unrelated to MTBE contamination—has never used these wells. Under this theory, the only possible injury to the City is the future injury that might occur if the City puts these wells back in service. In turn, actual injury will occur only if MTBE is still in the water at a level that requires remediation when the wells are brought on line.

Exxon also makes several related arguments. First, Exxon claims that the City does not have standing to sue because it suffers no current or imminent injury. Second, Exxon asserts that this suit is not ripe for adjudication. Third, Exxon argues that the City's claim of future damages is too speculative to merit recovery under New York law. Fourth, Exxon states that the cost of treating MTBE—including the design of necessary facilities—is a pure economic loss, which does not constitute a cognizable injury. Exxon maintains that if the City is permitted to present evidence of future or past costs, the jury will likely become confused when assessing whether there is an injury. For all of these reasons, Exxon argues that the City should be precluded from presenting evidence of past or future treatment costs to these wells until the City establishes an actual injury.

The City responds that it suffered injury when its wells were contaminated by MTBE. Although Station 6 wells have not been in use for reasons unrelated to MTBE, the City argues that its current ability to use the wells is significantly hampered by the presence of MTBE. In particular, the City maintains that were it not for MTBE contamination, it would treat the other contaminants in order to use these wells. As a result, the City argues that the contamination constitutes a current injury.

The City also counters each of Exxon's secondary arguments. First, the City states that the suit is ripe for adjudication because it is presently injured by hardships including the inability to plan and to implement a treatment project for these wells absent recovery. Second, the City asserts its claim for damages is not speculative because it firmly intends to use these wells once it can treat them; thus damages can be calculated based on definite treatment costs. Third, it further argues that its damages claim is not speculative because it has already...